West Virginia Supreme Court Overrules Its Prior Finding In Brown V. Genesis Ii

July 9, 2012

In Brown v. Genesis II, the West Virginia Supreme Court, on remand from the United States Supreme Court, again considered the enforceability of an arbitration agreement in a nursing home negligence case.  In Brown I, the West Virginia Supreme Court found that Congress did not intend for nursing home arbitration agreements to be governed by the Federal Arbitration Act.   The West Virginia Supreme Court, in accordance with the United States Supreme Court’s mandate, overruled its prior finding.

The Court went on to consider the doctrine of unconscionability as it related to the arbitration agreements at issue.  In considering whether a contract is unconscionable a court must focus on the relative positions of the parties, the adequacy of the bargaining position, the meaningful alternatives available to the plaintiff, and the existence of unfair terms in the contract.  In considering procedural unconscionability, the court noted that issues that would be considered to determine whether there was a meeting of the minds between the parties were:  age, literacy, lack of sophistication of a party, hidden or unduly complex contract terms, the adhesive nature of the contract, and the manner and setting in which the contract was formed, including whether each party had a reasonable opportunity to understand the terms of the contract.  The Court then warned that while not entirely dispositive of the issue, procedural unconscionability often begins with a contract of adhesion.

The salient consideration for substantive unconscionability is whether the contract itself or a particular term is a one-sided agreement, “requiring arbitration only for the claims of the weaker party but a choice of forums for the claims of the stronger party.”   Thus, an enforceable arbitration agreement must have a “modicum of bilaterality.”   The Court also noted that the analysis should include whether the arbitration agreement imposes or may impose high costs which would act as a deterrent to a claimant in vindicating his or her rights in the arbitral forum.  However, the Court cautioned that whether a contract provision is substantively unconscionable should be assessed on a case-by-case basis.  Thus, the Court reversed the circuit court’s prior orders compelling arbitration and remanded the cases for specific fact finding regarding unconscionability.

The Brown II,  holding makes clear that the West Virginia Supreme Court is loath to enforce an arbitration agreement between a patient and a health care provider.  However, in light of the guidelines annunciated by the Court, it is possible for a nursing home facility to draft an arbitration agreement that should be found enforceable.  First, the agreement should be written in plain terms, and should make clear that an individual executing the agreement is giving up rights that they would have under the law.  Second, the arbitration agreement should not be contained as a part of any other agreement, such as an admission agreement, and it should plainly state that it is an agreement to arbitrate in bold font with each term having a clear explanatory title.  Third, the admission of the patient to the facility cannot be conditioned upon execution of the arbitration agreement.  Fourth, it may be prudent to allow the patient or their representative a period of time to rescind the agreement following admission to the facility.  Fifth, there should be mutuality of contract.  Thus, if the patient or their representative must resolve claims of negligence in arbitration, the facility must resolve claims relating to matters such as collections in arbitration.  Sixth, the arbitration agreement should not arbitrarily limit recoverable damages beyond limits otherwise imposed by law.  Finally, it may be wise to avoid fee shifting provisions and other similar provisions that would increase the potential cost imposed upon a claimant.  While following these considerations may somewhat limit the benefits of the agreement if enforced, avoiding litigation of these matters in West Virginia state court may still be worth the compromise.

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